THE latest inflation forecast for Ghana indicates that the rate would remain above the target band in the near-term, driven by external and domestic factors, and would only return to target about four-quarters ahead, said the central bank Monday.
In a press release after the 104th meeting of the Monetary Policy Committee (MPC) the bank listed the factors contributing to the inflationary risk as rising crude oil prices and its transmission to ex-pump petroleum prices and transportation costs, rising global inflation, food price uncertainties, and the fiscal outlook.
The country’s target for the medium term has been to achieve a threshold of 8±2 percent of inflation. However, after falling to 7.5 percent in May 2021, inflation increased throughout the second half of last year, ending December 2021 at 12.6 percent.
The central bank however announced the decision to hold the benchmark policy rate, its major tool for curbing inflation, at 14.5 percent.
The decision, the bank said was to assess the impact of the 100 basis points hike in the rate last November.
‘The MPC is of the view that the dynamics associated with the November 2021 policy rate hike are yet to be fully transmitted,’ the statement explained.
The central bank added also that it expected the 20 percent slash in the governments projected spending in 2022 to effect some fiscal corrections in the economy.
‘This fiscal policy measure will help to provide some correction, avoid the opening up of macroeconomic imbalances, and further deepen the fiscal consolidation agenda
‘This should also shift the consolidation process away from a revenue-led one to one which encapsulates both revenue and expenditure measures signaling a stronger commitment to keeping the deficit under check,’ added the statement.
Notwithstanding the decision, statement said the MPC would continue to monitor the impact of these policy measures and take the necessary policy decisions if the need arises.
On domestic growth conditions, Bank of Ghana said that the revised quarterly economic growth numbers affirmed the strength of the post-COVID-19 recovery.